Markets brace for a global energy shock

March 05, 2026 (MLN): Energy markets are screaming "red alert" as crude oil prices factor in a massive $18/bbl real-time risk premium following a weekend of military escalation in the Middle East.

The sudden death of Iran’s Supreme Leader and subsequent retaliatory strikes across the region have pushed the risk of a full closure of the Strait of Hormuz to the 98th percentile of all threats since 2005.

With 20% of the world's oil and LNG supply currently sitting in the crosshairs, the industry is bracing for a supply disruption that could fundamentally break global energy balances.

According to a recent commodities report released by Goldman Sachs, a massive "real-time" risk premium has already been baked into the market.

While the firm’s baseline energy price forecasts currently assume no sustained supply disruptions, it is warned that the potential for a full or partial halt of flows through the Strait represents a seismic threat to both oil and global Liquefied Natural Gas (LNG) prices.

The Strait remains the most important variable to watch, as it normally handles 20% of the world's oil and LNG supply.

The oil market is not waiting for official confirmation to move.

Following a 15% weekend gain in retail trading products, Goldman Sachs estimates an $18/bbl real-time risk premium is now embedded in crude oil prices.

This premium reflects the market pricing in approximately a one-month full halt in Strait of Hormuz flows.

While Iran’s own 2025 production of 3.5mb/d of crude represents 4% of global supply, the broader regional risk is much larger; Saudi Arabia, Iraq, and the UAE exported a combined 13.1mb/d via the Strait last year, primarily to China.

While oil often grabs the headlines, the risk to natural gas may be even more acute. European (TTF) and Asian (JKM) gas prices had embedded little-to-no risk premium until this past Friday.

However, approximately 80 mtpa of LNG 19% of global supply, mainly from Qatar flows through the Strait.

In a scenario where these flows are halted for one month, the report states it is likely that European gas prices could approach 74 EUR/MWh ($25/mmBtu).

This would be a staggering 130% increase from current levels, hitting the threshold that triggered massive industrial demand destruction during the 2022 European energy crisis.

Despite the dire scenarios, the report highlights several "buffers" that could help the market absorb a negative supply shock if the disruption is not prolonged.

Market Buffers and Supply Offsets

The path forward depends heavily on whether infrastructure sustains permanent damage.

If oil were to be trapped in the region for a sustained period such as four months Goldman Sachs warns that prices would likely rise disproportionately to force demand destruction, as inventories cannot be drawn indefinitely.

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